On November 14, 2018, the Saint Paul City Council passed, and Mayor Melvin Carter signed into law, an ordinance that will raise the minimum wage in Saint Paul, Minnesota to $15 an hour starting as early as 2022 for large businesses operating within city limits.  Long a priority of Mayor Carter, the increased Saint Paul minimum wage is now more closely aligned with that of its twin city, Minneapolis.

The minimum wage ordinance is the result of almost a year of lobbying, discussion, and debate involving workers, organized labor, the business community, and elected officials.  The city commissioned a study group that met regularly and received comments from interested stakeholders.  Among the findings incorporated into the language of the ordinance was that Saint Paul has the highest percentage of residents living in poverty of any metro city with a population over 1,000 in Minnesota, more than 62,000 Saint Paul residents have incomes below the federal poverty level, and an increase in the minimum wage to $15 per hour would directly impact 31% of Saint Paul workers.

Wage Phase-In Based on Employer Size

The ordinance anticipates a phase-in to $15 an hour between January 1, 2020 and July 1, 2028, but the amount of the increase and length of time to reach the $15 an hour level varies by business size.  Business size is determined by the average number of employees per week during the previous calendar year and includes all employees, whether full-time, part-time, joint, or temporary, regardless of the employee’s location.  The wage must be paid to any employee for all time worked within the geographic boundary of Saint Paul as long as the employee works a minimum of two hours within the city over the course of one week.

For the City of Saint Paul and any employer with over 10,000 employees, the minimum wage increases to $12.50 an hour on January 1, 2020, with an increase to $15 an hour on July 1, 2022.  Businesses with 101 to 10,000 employees have a more gradual increase culminating on July 1, 2023.  Employers with 6 to 100 employees will reach the $15 per hour goal by July 1, 2025, and employers with 5 or fewer employees have until July 1, 2027 to meet the $15 an hour requirement.  Once an employer reaches the $15 an hour level, the minimum wage will be adjusted for inflation.

While the increase to $15 seemed likely to pass from the beginning of Mayor Carter’s term, there was extensive debate and discussion of whether there should be a credit for tipped workers.  Consistent with the state law, the ordinance does not recognize a tip credit that would allow employees’ tips to count toward the minimum wage.  The ordinance allows for a lower rate for 14-17-year-olds for the first 90 days of their employment.  It also exempts the Saint Paul Saints baseball team from compliance.

Enforcement

The ordinance has an express prohibition against retaliation for exercising an employee’s rights.  The retaliation prohibition is more stringent than those in most employment statutes, including a rebuttable presumption of retaliation if an adverse action occurs within 90 days of the protected activity, and a requirement in all other situations that the employer demonstrate it would have taken the action in the absence of such protected activity.  Employees who mistakenly but in good faith allege a violation are similarly protected by the retaliation provision.

The Saint Paul Department of Human Rights and Equal Opportunity will enforce the ordinance.  Upon a finding of a violation of the ordinance, an employer can appeal the determination to a hearing examiner.  At the hearing, the city must prove the employer violated the ordinance by a preponderance of the evidence.  The hearing officer must present her determination to the City Council for final determination.  Penalties for violations include reinstatement and back pay, fines ranging from $500 to $1,000 per violation, and liquidated damages.  The ordinance allows for a private right of action after the exhaustion of administrative remedies.

Notice and Record Keeping

Employers are required to provide employees with annual notice that they are entitled to minimum wage and have the right to report violations of the ordinance.  The Department will create a poster and model notice for employer use.  Employers that have a handbook must include notice of the rights and remedies under the ordinance. 

Employers are required to create and maintain records documenting wages paid to each employee for three years. Employers are required to allow the Department access to those records upon receiving reasonable notice.  The failure to maintain records or allow access results in a presumed violation of the ordinance absent clear and convincing evidence otherwise.

Conclusion

For Minnesota employers with employees located in Minneapolis, Saint Paul, and other locations, they can now expect the increased administrative burden of complying with the varying wage rates by jurisdiction.  Fortunately, most employers have 19 months to prepare for these Saint Paul changes.  For nationwide employers, the likelihood of additional jurisdictions implementing similar plans to raise the minimum wage may create additional compliance challenges.